Aussie Iron Ore sells at half price

China Iron and Steel Association research director-general Chen Xianwen said if Australia’s iron ore suppliers wanted to change the way they set prices "they should sit down and talk to all the parties involved and set out firm reasons that convince everyone," wrote Rowan Callick in The Australian (1/11/2007, p. 19).

Benchmark system should remain: The benchmark system that fixed a price before shipping was "a mechanism formed and tested by decades of history, and shouldn’t be interrupted," he said.

Shipping prices rise by 166 per cent: Sun Wendong, president of the trading division Wugang, one of China’s biggest steelmakers, told the annual iron and steel confer­ence in China’s north-eastern city of Dalian that the Baltic Dry-goods Index that measured the relevant shipping price had shot up from 3000 in July 2006 to about 8000 today — a rise of 166 per cent.

Aus ore comparatively cheap: As a result of this surge, Australian ore cost $US80-85 a tonne in the world’s biggest market, China, while ore from Brazil was about $US180 and ore from India — bought mostly on the spot market — was about $US170. Even China’s domestic ore cost, on average, more to a Chinese steel mill than Australian ore because the domestic ore was sold mostly on the spot market.